With home prices in Los Angeles just about as high as they’ve ever been, most buyers probably aren’t eager to get into a bidding war.
Fortunately, a new report from Zillow shows that the number of homes sold above asking price declined significantly in 2019—at the same time as price growth tapered off.
In the Los Angeles metropolitan area (which includes Orange County), the share of homes that sold for more than the listed price dropped from nearly 35 percent in 2018 to 28 percent in 2019. It was the first year since 2014 that the percentage of homes sold above asking price dropped below 30 percent.
The amount of money sellers ponied up in bidding wars also declined—from $15,000 on average in 2018 to $12,000 last year.
“There wasn’t quite as much competition last year,” says Hattie Ramirez, a real estate agent with Keller Williams. “Instead of five or six offers on a good property, you might see three or four.”
Zillow points to a brief surge in inventory—or the total number of homes listed for sale—as a potential reason for the drop-off in below-asking-price sales. In the first half of 2019, buyers had more options to choose from, meaning some may have been less willing to go out on a limb to close deals.
Still, Los Angeles was a more competitive market than most; of the nation’s 35 largest metro areas, only eight saw a higher rate of sales above asking price than Los Angeles. Across the country, 19.9 percent of homes sold for more than the listed price last year.
Buyers in some California cities were much more likely to have to outbid one another when purchasing a home. In San Jose, 39 percent of homes sold above the asking price in 2019; in San Francisco, just under half did.
Competition between LA buyers could heat back up again in the year ahead. According to the California Association of Realtors, Los Angeles County had 2.4 months of unsold inventory available in December—down from 3.5 months a year earlier.
Months of unsold inventory is a metric real estate professionals use to describe how many homes are on the market. The figure represents how many months it would take for every home now listed to sell at the current rate. When the number goes down, it usually means buyers are more likely to be competing for the same homes.
Ramirez confirms the number of homes available seems to be on the decline.
“I don’t know what it is,” she says. “Typically in mid-January you see a lot of newly listed homes.”
She says that the lack of inventory is already ramping up pressure for buyers.
“You have to write a great initial offer to get your foot in the door,” she says. “Anything under $1.5 million is definitely getting multiple offers.”